Slide 1: Second Quarter 2021 Investor Presentation
NASDAQ: DGICA/DGICB Second Quarter 2021 Investor Presentation July 27, 2021
Slide 2: Safe Harbor
Safe Harbor The Company bases all statements made in this presentation that are not historic facts on its current expectations. These statements are forward-looking in nature (as defined in the Private Securities Litigation Reform Act of 1995) and involve a number of risks and uncertainties. Actual
Slide 3: Investment Thesis
Investment Thesis • Well-established regional insurance group with a diverse book of business including both commercial and personal lines • Shift in focus to commercial lines growth and actions to improve personal lines results contributed to recent margin improvement (96.0% combined ratio and 9% b
Slide 4: Company Overview
Company Overview Donegal Group Inc. is an insurance holding NASDAQ: DGICA/DGICB company whose subsidiaries and affiliates Corporate Headquarters Marietta, Pennsylvania offer property and casualty insurance in 24 DGICA Share Description 25.1 million shares outstanding at 6/30/2021 (Voting rights 0.1:
Slide 5: Second Quarter 2021 – Operating Results
Second Quarter 2021 – Operating Results Solid Organic/Acquisition Growth and Continuation of Improved Results Profitability in Commercial Lines in Personal Lines Net Premiums Written Net Income Combined Ratio Book Value Net income of $16.2 million, or 53 Book value per share cents per diluted Class
Slide 6: Accomplishments in the Last Three Years
Accomplishments in the Last Three Years • Solid financial results in 2019, 2020 and 1H 2021 • Continuing growth in our commercial lines segment • Development of new personal lines products on track for deployment beginning in Q3 2021 • Favorable net development of reserves following strengthening ac
Slide 7: Mix of Commercial and Personal Lines
Mix of Commercial and Personal Lines Net Premiums Written for Q2 2021 by Line of Business Personal Auto Homeowners, Homeowners Personal lines = 38.4% of NPW Other Personal, 14.5% 2.8% Other Personal Renewal Premium Workers' Comp, 13.6% Personal Auto, Increases Averaged ~3.5% 21.1% Commercial Auto Co
Slide 8: Growth and Profitability in Commercial Lines
Growth and Profitability in Commercial Lines 94.3% Commercial Lines Statutory Combined Ratio for Q2 2021 100.0% 110,000 ✓ Expand core Donegal products across regions 100,000 95.0% ✓ Growth focus on accounts with premiums in $10,000 to 90,000 90.0% $150,000 range 85.0% 80,000 ✓ Expand appetite within
Slide 9: Strong Capital Position and Shareholder Returns
Strong Capital Position ~ Shareholder Returns Book Value Plus Cumulative Dividends Strong Operating Results Since Donegal Began Implementing Corporate Initiatives in 2018 • Rated A (Excellent) by $20.00 A.M. Best $1.72 $2.03 – Debt-to-cash/investments of $1.13 approximately 3.1% $15.00 $0.56 – Premi
Slide 10: Donegal: Where We've Been and Where We're Going
Donegal: Where We’ve Been and Where We’re Going www.DonegalGroup.com 10
Slide 11: Organic Growth Centered on Relationships with ~2,300 Independent Agencies
Organic Growth Centered on Relationships with ~2,300 Independent Agencies Ongoing Objectives Continuing Focus on Commercial Lines Growth • Achieve top-three ranking within appointed • Emphasize expanded commercial lines products agencies in lines of business we write and capabilities in current agen
Slide 12: Donegal Mutual Acquisition of Mountain States Insurance Group
Donegal Mutual Acquisition of Mountain States Insurance Group Entering the Southwest – In May 2017, Donegal Mutual completed the merger of Mountain States Mutual Casualty Company with and into Donegal Mutual. Donegal Mutual and its two insurance subsidiaries conduct business as the Mountain States I
Slide 13: Maintain Multi-Faceted Regional Growth Strategy
Maintain Multi-Faceted Regional Growth Strategy Now operating across 24 states in five operating regions M&A transactions 10 since 1988 Acquisition Criteria • Serving attractive geography • Favorable regulatory, legislative and judicial environments • Similar personal/commercial business mix • Premi
Slide 14: Significant Benefits to Shareholders from Mutual Relationship
Significant Benefits to Shareholders from Mutual Relationship • Interrelated operations and pooling agreement with Donegal Mutual since inception in 1986 • At June 30, 2021, Donegal Mutual held approximately 41% of our outstanding Class A common stock and approximately 84% of our outstanding Class B
Slide 15: Conservative Investment Strategy
Conservative Investment Strategy $1.3 Billion in Invested Assets • 92.5% of portfolio invested in fixed (at June 30, 2021) maturities Corporate Mortgage Backed Securities (MBS) – Effective duration = 4.8 years 31.6% 19.6% – Tax-equivalent yield = 2.6% • Emphasis on quality Treasury and • Liquidity m
Slide 16: Valuation vs. Multi-Line Insurers
Valuation vs. Multi-Line Insurers (Stock Price as of July 26, 2021) 2.50 Price to Book Multiple 2.06 2.00 1.85 1.76 1.69 1.57 1.60 1.61 1.50 Peer Average 1.4X 1.40 1.27 1.28 1.28 0.98 1.03 1.00 0.87 0.74 0.50 0.00 www.DonegalGroup.com 16
Slide 17: Investment Conclusions
Investment Conclusions • Diverse book of business of both commercial and personal lines • Opportunities for growth in multiple lines of business and several regional markets • Emphasis on solid underwriting returns driving margin improvement • Strength of brand and solid agency relationships provide
Slide 18: Contact Information
Contact Information Contact Information Donegal Group Inc. 1195 River Road P.O. Box 302 Marietta, PA 17547 Phone: (800) 877-0600 Corporate Website: donegalgroup.com Investor Relations Contact Mr. Jeffrey D. Miller Adam Prior Phone: (800) 877-0600 x7357 (212) 836-9606 investors@donegalgroup.com aprio
Slide 19: Financial Supplement 2021 Second Quarter
Financial Supplement 2021 Second Quarter
Slide 20: Summary of 2021 Second Quarter Financial Results
SUMMARY OF 2021 SECOND QUARTER FINANCIAL RESULTS Three Months Ended June 30, Six Months Ended June 30, 2021 2020 % Change 2021 2020 % Change (dollars in thousands, except per share amounts) Income Statement Data Net premiums earned $ 192,489 $ 184,374 4.4% $ 379,740 $ 371,627 2.2% Investment income,
Slide 21: Insurance Operations
INSURANCE OPERATIONS Three Months Ended June 30, Six Months Ended June 30, 2021 2020 % Change 2021 2020 % Change (dollars in thousands) Net Premiums Earned Commercial lines $ 115,300 $ 101,870 13.2% $ 224,525 $ 203,645 10.3% Personal lines 77,189 82,504 -6.4 155,215 167,982 -7.6 Total net premiums e
Slide 22: Underwriting Performance
UNDERWRITING PERFORMANCE Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 GAAP Combined Ratios (Total Lines) Loss ratio (non-weather) 53.1% 47.0% 56.5% 53.0% Loss ratio (weather-related) 6.1 10.1 4.9 6.9 Expense ratio 36.0 34.3 35.1 33.8 Dividend ratio 0.9 0.9 0.8 1.0 Combin
Slide 23: Investment Operations
INVESTMENT OPERATIONS June 30, 2021 December 31, 2020 Amount % Amount % (dollars in thousands) Fixed maturities, at carrying value: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 112,042 8.9% $ 125,250 10.3% Obligations of states and political subdivisions 40
Slide 24: Reconciliation of Net Premiums Earned to Net Premiums Written
RECONCILIATION OF NET PREMIUMS EARNED TO NET PREMIUMS WRITTEN Three Months Ended June 30, Six Months Ended June 30, 2021 2020 % Change 2021 2020 % Change (dollars in thousands) Reconciliation of Net Premiums Earned to Net Premiums Written Net premiums earned $ 192,489 $ 184,374 4.4% $ 379,740 $ 371,
Slide 25: Reconciliation of Net Income to Non-GAAP Operating Income
RECONCILIATION OF NET INCOME TO NON-GAAP OPERATING INCOME Three Months Ended June 30, Six Months Ended June 30, 2021 2020 % Change 2021 2020 % Change (dollars in thousands, except per share amounts) Reconciliation of Net Income to Non-GAAP Operating Income Net income $ 16,164 $ 22,679 -28.7% $ 26,69